To accompany AccountingWEB’s Financial Reporting channel, associate editor Jennifer Adams has compiled this collection of guidance documents relating to company law.
Companies may be inanimate objects but they still have a life comparable with that of a human. They are born (incorporation) and die when they are struck off or liquidated. Sometimes they marry (merge) and have children (divisions of shares). But through all these phases of their lives companies are subject to specific legal rules and conditions.
Over the past couple of years AccountingWEB has published articles covering events that happen over the life of a company. Many of these guides stemmed from questions asked and comments posted on our Any Answers page. This company law library brings all of those guides together in one place for easy reference. Many of the articles include practical checklists covering points that may not be found in legal textbooks.
CONTENTS - click links to see listings of detailed guides
Companies Act 2006 overview
Different corporate structures
Shareholdings and dividends
Closing a company
Company law tag page - lastest updates and queries
Companies Act 2006
The Companies Act 2006 remains the foundation stone of current company law. The articles in this section date from when the act was first implemented (2009-10), but still provide a convenient overview of the main provisions. With the government keen to lighten the red tape burden on business, also check the AccountingWEB Company law tag page for updates on relevant developments such as simplified micro-entity accounting rules, increased audit thresholds and the reform of annual returns.
A practical guide to the Companies Act 2006 Sets out the act’s key provisions concerning formations, members and management, decision-making meetings, accounts and audit and a company’s capital. Written in 2010, the article is still relevant as a basic overview of the more important provisions of the Act
Implementing the Companies Act for small business Highlights the most important sections of the Companies Act 2006 for SMEs, incuding preparation of accounts; filing deadlines; directors loan accounts. This article was written in 2009, before the Act was implemented, but remains relevant.
Companies Act 2006 - accounts and audit A checklist of the specific provisions within the act that relating to accounts; audits and auditors; and practical points on relevant filings.
Companies Act 2006 - company capital Checklist summary covering: share capital; share premium account; reduction of share capital; purchase of own shares; and debentures.
Companies Act 2006 - decision-making meetings and resolutions Details and practical suggestions on specific CA2006 sections on meetings and resolutions.
Company formation and after
Incorporation can bring many benefits to a business not least in the form of tax savings, but there are a number of factors that should be considered before taking the plunge. The articles here discuss the legalities and how to tackle them. Several incorporation methods are discussed - whichever is chosen, additional practicalities need attention post incorporation.
Incorporation - why bother? A checklist of the financial, legal and practical factors to consider when making the decision, starting with the potential tax benefits of incorporation (based on 2011/12 rates).
Company formation: what’s best for you? An examination of the pros and cons of the different methods of incorporation, whether DIY via Companies House, through an agent, online or on paper. [Formation issues for advisers were explored in more detail in the 2012 company formations debate].
Formation of a company under CA2006 An explanation of the specific provisions in the Companies Act 2006 on formations, including checklists covering incorporation; memorandum and articles; and company officers.
Post-incorporation procedure A checklist of the most important matters to address, and some that are not so urgent.
Company names and name changes Explains why it is necessary to choose a business name carefully, accompanied by a checklist of company naming tips.
Non-standard company structures
UK company law allows the creation of companies other than those limited by shares. This section details different types of company and their uses in different situations, including dormant companies.
Companies limited by guarantee Differences between companies limited by shares and by guarantee and the advantages and disadvantages of each approach. Includes sections on distributing profits, accounts and taxation, community interest companies and mutual trading firms.
Not for profit companies Procedures on incorporation and administrative processes for different types of company including CICs and charitable incorporated organisations.
Charitable incorporated organisations What you need to know about CIOs and where the new structure can be useful.
Flat management companies Details of different structures including resident management companies; companies limited by shares; companies limited by guarantee; and right to manage (RTM) companies
Dormant companies Different definitions used by Companies House and HMRC and a checklist of returns required by each body. [HMRC have changed its system since this article was written. Companies House will now advice HMRC of a company formation and the tax department will send a CT41G letter to the company’s registered office that includes the company’s new UTR. HMRC only wants to be notified when the company becomes ‘active’, which can be done online on the Register for HMRC taxes page.]
UK corporate law imposes filing obligations and responsibilities on directors of all UK registered companies. This section includes articles detailing those requirements including the submission of an Annual Return. Online filing helps keep errors to a minimum by automatically completing some sections of the forms. Errors do still occur that can result in rejections. One of the articles in this section lists the most common errors and how to avoid them.
Rights and particulars - how to fill in an AR01 Highlights a common problem when completing the Rights & Particulars section of the Annual Return (AR01) and includes some wordings that should be accepted by Companies House.
Companies House filing errors Details the main reasons why forms are rejected and the process for filing them again. The key message is to “check and check again”. Also covers use of SIC codes and electronic reminders.
Directors appointments, registrations, removals Explains filing requirements relating to the appointment, registration and removal of company directors. The Companies House PROOF monitoring system to prevent fraudulent filings is also explained.
Many directors do not appreciate that a director’s prime duty is to manage the company on behalf of the company’s shareholder owners. Within this remit each director must ensure that the company complies with the law. This section looks at the nature of the director’s office, their role and responsibilities, the risks and liabilities and methods of appointment and removal/disqualification. The section also includes an article on Directors Loan accounts which is an area of confusion for many directors and their accountants.
Directors’ legal duties A checklist of statutory duties and suggestions for compliance, not just with Companies Act 2006, but also other relevant regulations including Companies House filing requirements. A separate article sheds more light on what HMRC expects from company directors.
Induction process Emphasises the value and use of a directors’ induction policy, with suggestions for content to be included in an induction pack.
Document retention Details the minimum retention periods of documents relevant to a company, with a checklist on what to include in a company document retention policy.
Conflicts of interest Explains the legal duty of directors to minimise ‘conflict of interest’, with a checklist of potential scenarios and suggestions on dealing with regulatory, transactional and situational conflicts.
Overdrawn directors’ loan accounts A checklist of disclosure requirements that sets out typical problems and the correct accounting approaches in different scenarios, some of which is drawn from an HMRC toolkit on the subject.
Disqualifications When and why the BIS will disqualify a director, including checklists on insolvency practitioners’ reports, and the effects of a disqualification order.
Removal of directors What to do when directors disagree, including advice on the resolutions and procedures for removal, legal obstacles such as ’Bushell v Faith’ clauses, derivative claims, and the sacked director’s recourse.
Protection against personal claims Protection afforded to directors under the Companies Act 2006 and model articles and how to minimise the effects of a director being sued, including insurance and indemnities.
Directors’ duties for companies in difficulty During an insolvency process the directors’ duties change. Checklists are provided on the pre-cessation procedure and what the directors should do.
This section includes articles that detail the legalities and practicalities relevant to company meetings whether held as a meeting of the Board of Directors or as the company’s Annual General Meeting. With the advent of technology meetings need not necessarily be held face to face. With that in mind there are articles in this section that discuss the future of meetings using virtual technology.
Board meetings Covers the legal obligations for holding board meetings and rules governing their conduct, including the recording of minutes.
Annual general meetings A checklist of reasons for holding AGMs and the legal notice requirements and how to manage them. Related articles cover the specific Companies Act 2006 sections on decision-making meetings and resolutions and the legal method to force a meeting to take place following the Smith v Butler case on a directors' dispute.
Virtual meetings Explains regulations allowing meetings to be held using webcasts and other electronic methods, plus the pros and cons for doing so.
Share capital and dividends
This section covers the capital of a company and its shares, including commentary on dividends and dividend waivers as well as the legalities on share reorganisation. For a quick overview see Companies Act 2006 - company capital.
Dividends checklist Points to consider when making a dividend payment, with important advice about the correct way to make declarations and avoid illegal payments.
Share reorganisation Examines the reasons for reorganisations and includes checklists for issuing bonuses, reducing shareholdings and registering the changes with Companies House.
Rights issue of shares When and why they are necessary, with a checklist covering practicalities and procedures. Includes a discussion of the ‘Duomatic’ principle
Share buybacks Checklists on the legal conditions and procedures for arranging a buyback, plus a discussion of how to fund it.
Accounting for share buybacks Explains the accounting issues relating to buybacks, including example calculations, and Companies Act rules on exceptions. More buyback advice here.
Share valuation A checklist on carrying out minority shareholding valuations with recommendations for action following the Erdal tax case on a minority share valuation.
Shareholders’ agreements What is a shareholder agreement, and when should it be used? Includes sample clauses and a comparison with articles and the pros/cons of each approach.
Dividend waivers When to use a waiver and how it works. Includes checklists on specific options and the issues that may arouse HMRC’s interest.
Closing a company
There are different methods that a company can close; which one is used will depend upon the reason for closure. This section covers the different methods of ceasing a company and the legalities in doing so. Several articles explain 2013 legislative changes covering the tax concessions (ESC C16) that applied when a company was struck off.
Striking off a company Explains the most common process for ceasing a company. Previously an informal arrangement under ESC16 (which applied at the time the article was written), it has now been enacted in law.
Liquidation Checklists that explain the steps required when a company is placed into liquidation voluntarily, and when it is compulsory.
Placing in administration Commentary on the “pre-pack” process introduced by the Insolvency (Amendment) (No. 2) Rules 2011.
When and why to use pre-packs Good and bad reasons for using pre-pack, plus alternative suggestions. See the Pre-pack insolvency page for additional information.
ESC C16 provisions become law Capital distributions limited to £25,000. See the ESC C16 tag page for further commentary and suggestions on current practice.